On Wednesday, Truist Securities updated its outlook on Brown & Brown (NYSE: BRO) shares, raising the price target to $104 from $94, while reiterating a Buy rating on the stock. The revision reflects the firm's positive expectations for the company's organic growth, which is anticipated to align with current market predictions.
The analyst's optimism is partly based on recent accelerations observed in the MarketScout rate survey and multi-state Excess & Surplus (E&S) data, both of which have historically been indicators of stock outperformance.
Additionally, the Florida Surplus Lines Index, which has shown a strong correlation with Brown & Brown's organic growth, exhibited a sequential increase in total premium, with a correlation coefficient of 82% since the first quarter of 2020.
While these factors contribute to a favorable outlook, the company faces a challenging year-over-year comparison in its property segment. This is expected to limit the potential for an upside in the upcoming quarterly results. Despite this, Truist Securities sees enough positive indicators to warrant the increased price target.
The new price target of $104 represents a valuation of 18.6 times the forecasted EBITDA for the following year. This valuation is just below that of the industry's large-cap leader, Gallagher. The target increase by Truist Securities signals confidence in Brown & Brown's performance and potential for continued growth in the insurance brokerage sector.
InvestingPro Insights
As Brown & Brown (NYSE:BRO) garners positive attention from Truist Securities, real-time data and insights from InvestingPro further illuminate the company's financial landscape. The firm's robust track record of raising its dividend for 31 consecutive years, coupled with a low P/E ratio relative to near-term earnings growth, underscore its appeal to investors seeking stability and growth potential. Notably, Brown & Brown's P/E ratio stands at 27.62, with a slight increase to 30.71 when adjusted for the last twelve months as of Q1 2024. This aligns with the company's reputation for consistent dividend payments over 39 years, a testament to its financial resilience.
InvestingPro data also reveals a healthy revenue growth of 14.96% for the last twelve months as of Q1 2024, which is a strong indicator of the company's expanding operations. Additionally, the company has demonstrated a significant 23.9% total price return over the past six months, showcasing its robust market performance. With a dividend yield of 0.58% and a recent dividend growth of 13.04%, Brown & Brown remains an attractive option for income-focused investors.
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